I am so very sorry for the sadness you are going through. You were right in trying to convince your family that the one year old yorkie was a bit young...I also agree that in many cases a 4lb yorkie can be to small to breed (depending on how their bone structure is). I might also add that I have learned that it is best to use a stud who is smaller than the female. It sounds to me that you care deeply for your yorkie (as we all care for our babies) and that you did everything that you knew to help the mama. You were right to stay with her during the whelping as they should never be left alone to whelp. I would remove the dead puppy.....she will be sad for a while and may even "adopt" a stuffed toy to replace it, but she will be okay after a few days. I would definitely take her to a vet ASAP to be sure all pups and placentas are out and that everything else checks out okay too.
((((Hugs)))) and good luck to you and the little mama.